“But FDs are totally risk-free, right?”

That’s what my friend told me the other day. He said, “I’m super risk‑averse, just want peace of mind. That’s why most of my savings are in FDs.”

And sure, on the surface, FDs feel safe: low volatility, predictable interest… the classic “sleep‑well-at-night” investment.

But here’s something most people don’t realize: FDs aren’t 100% risk‑free.

Imagine this scenario: The bank holding your FD gets into serious trouble, maybe even winds up. You might expect to get back every paise right away. That’s not how things actually work.

Thanks to the Deposit Insurance and Credit Guarantee Corporation (DICGC), your deposits are protected, but only up to ₹5 lakh per depositor per bank, including principal plus interest. And that includes all the FDs or accounts you have with that bank, across branches or account types. Beyond the 5 lakhs amount, recovery depends on RBI’s resolution, usually through mergers/restructuring where depositors get full money back, or via liquidation where payouts depend on asset sales

Here’s the kicker: even if you hold multiple FDs in the same bank, you’ll only get up to ₹5 lakh total, not ₹5 lakh per FD. Meaning, if you have 10 FDs each of ₹1 lakh in Bank X, only ₹5 lakh is insured, regardless of account count.

So what’s the simplest way to protect yourself?

Spread them out, diversify across multiple banks. Each bank offers a fresh ₹5 lakh cover for you (per ownership category, but ideally across different banks). That’s how you truly hedge your FD exposure.

Remember, even the most “safe” instruments have caveats. Simple diversification across banks ensures that your “tension-free” investments stay truly secure.